Collateralised pricing decoupling from traditional rated paper

Addressing the rising role that collateralised capacity is playing in the market, Simon Burton, CEO of S.A.C. Re, warned that there is an increasing disconnect between rates for traditional and collateralised capacity.

Speaking with Bermuda:Re Burton said that "collateralised pricing has absolutely decoupled from that of rated paper, and while this is likely to be a relatively short term anomaly, it is causing some concern within industry". Such concerns are particularly telling for new players such as S.A.C. Re, looking to build a presence in the market, but such developments clearly present a challenge to all bricks and mortar reinsurers.

Nevertheless, S.A.C. Re has had a good first year, with the reinsurer already extending capacity to over 120 clients. Many view the company as a welcome addition to their panel of reinsurers, looking to benefit from its focus on conservative underwriting, said Burton.

Addressing the timing of the company’s entrance into the market and the competition it has faced, Burton said: "the presence of an alternative investment strategy in S.A.C. Re enabled us to raise capital at above book value and launch at a time of depressed valuations. A more traditional strategy would have been a non-starter."